Rental management: what changed in Paris on July 1st 2019?
Rental management was in the news in Paris on July 1st 2019 with measures aimed to limit abusive rent increases which shall be applicable for five years. The implementation of rental management in Paris is the result of a technical application of the “Elan” law which was adopted last year and applies only to municipalities with an insufficient stock of rental accommodation. From Monday, Parisian landlords were obliged to set rents according to a reference scale. A failure to respect regulations could be sanctioned by a fine of between 5,000 and 15,000 euro.
Rental management in Paris in 2019
Between 2015 and 2017 the “Alur” law controlled rental management in the capital. This law was however annulled by the administrative tribunal. From July 1st 2019 any new lease, whether finalised or renewed and for a furnished or unfurnished rental, must respect the “loyers médians de reference” (median rental reference scale). Owners may no longer rent an apartment at the price they want. For example, an unfurnished 2-room apartment in a building in the capital’s 7th District’s Ecole Militaire neighbourhood and dating from before 1946 will have a reference rental of 27.9 euro per square metre.
In detail, the OLAP (Observatoire des loyers de l’agglomération parisienne) draws up this scale of “loyers médians de référence” for the capital’s 80 neighbourhoods. They are then fixed by prefectural decree. The year of the building’s construction, its location, the number of rooms and the type of accommodation are all criteria taken into account in calculating this reference rental price. The Observatory determines three types of reference rental price: the reduced reference rental price (30% lower than the reference rental price), the standard reference rental price and the increased reference rental price (20% above the reference rental price). To know if the applied rental price is above board, the landlord must ensure that it does not exceed the increased reference rental price or be below the reduced reference rental price.
Rental management simulation in Paris
In order to simulate rental management in Paris, go to http://www.referenceloyer.drihl.ile-de-france.developpement-durable.gouv.fr/. Here you must indicate the characteristics of your asset (the number of main rooms, the date of construction, and whether the rental is furnished or not). You then may select the applicable period. Finally, enter the asset’s address or click on the corresponding neighbourhood on the map to the right of the search engine. You will then obtain the reduced reference rental price, the standard reference rental price and the increased reference rental price (expressed as a price per square meter of living space). Let’s imagine that you are a landlord renting out a new furnished two-room apartment in neighbourhood 67 (Batignolles in the capital’s 17th District). You will get three results: a reduced reference rental price (19.40 euro per square metre), a standard reference rental price (27.70 euro per square metre) and an increased reference rental price (33.20 euro per square metre). If for example the apartment in question has an area of 36 square metres, the reference rental price shall therefore from 1 July 2019 be fixed at 997.2 euro. It must not exceed the increased reference rental price, that is to say 1195,20 euro
Rental management in Lille
Could rental management also be on the way back in Lille? As in Paris, previous measures in place were annulled by the tribunal in 2017. Lille however wants to reintroduce rental management as soon as possible. Campaigners for many months sought to have measures reintroduced in Lille, Lomme and Hellemmes for an experimental period of five years. The European Metropolis of Lille submitted a dossier to the State, according to a statement dated June 5th last. Reinstating rental management is required, according to the council, as a result of “a 70% increase in private rental prices between 2000 and 2012”.
The Elan law and rental management
With an experimental implementation of rental management over a period of five years, the Elan law also allows penalties to be applied. Landlords who do not comply with the law are liable to be penalised by a fine ranging from between 5,000 and 15,000 euro. Sanctions however are not automatic; they are applicable following a “commission de conciliation” (conciliation board meeting). In the context of a new lease, the landlord must now mention the reference rental price and the increased reference rental price in the lease. If the tenant finds that these are missing, he or she has a period of one month to send formal notice to the landlord. If the latter does not reply or refuses to adhere to his obligations, the tenant has three months from the date of his or her claim to take to landlord to the “tribunal d’instance” to obtain a reduction in rent. For the renewal of a lease, the procedure is different. Before the end of the lease the landlord has six months to propose a new rental price. The tenant has five months to make an offer. In the absence of an agreement, the tenant or the landlord may refer the matter to the conciliation board.